In Western Australia, where owner builders sell the home which they built (or partially built), the law requires that the owner builder take out an Owner Builder Indemnity Insurance Policy.
1. What is Owner Builders Indemnity Insurance?
Builders Indemnity Insurance is a compulsory insurance required by the Home Building Contracts Act 1991 (WA) “Act”.
2. What does Owner Builders Indemnity Insurance cover?
The Builders Indemnity Insurance is designed to provide the purchaser (and subsequent purchasers) with cover for the Statutory Warranties provided in the Act. Importantly, claims can generally only be made under these policies if the Owner Builder dies, cannot be located or becomes insolvent. Otherwise, it is the Owner Builders responsibility to rectify any faults that are not listed as defects, incomplete works or second hand materials under the defect report.
3. Who is required to have Owner Builders Indemnity Insurance?
The legislation applies to any residential building work undertaken by an Owner Builder, over $20,000 in value. This insurance only applies where the property is sold within 7 years from the Building License date in Western Australia. It is not required if the Owner Builder does not sell the property within this period.
4. What is the required insurance cover period for Builders Indemnity Insurance?
Home Indemnity Insurance commences from the Building License date and extends for 7 years. The maximum limit of indemnity is generally $100,000.
5. What happens if an Owner Builder sells without Owner Builder Indemnity Insurance?
The Act indicates that where an Owner Builder sells within 7 years from the Building License date and fails to obtain Owner Builder Indemnity Insurance, or attach an insurance certificate to the Contract of Sale, they can face a fine of up to $10,000. If a Contract of Sale has been entered into without Owner Builder Indemnity Insurance, the purchaser can void the contract at any time before completion of the contract.
6. Documentation required to support Insurance applications
Owner Builders should check with their own insurance company and or insurance broker as to the specific requirements that they may require for their proposed insurance applications. However, in general, the following documents are required to support an inspection application.
· A completed proposal form
· A defects report, not more than 6 months old
· Your building license
7. Owner Builder Indemnity Inspection Checklist
The following information is produced to help Owner Builders to prepare for an Inspection by Houspect to prepare a report that can be submitted to your Insurance Company for Builders Indemnity Insurance.
What do you need to provide to Houspect on the day of the Inspection:
· Council Building License – complete including pages listing the council conditions. Original copy of the latest approvals including all amendments. Faxed copies not acceptable.
· Stamped and Approved Plans – Building architectural and engineering drawings attached to building license as approved for construction by the local council. Needs to contain Council Approval stamp from the Building department. Drawings stamped approved for Town Planning not applicable/acceptable.
· Certificate of Completion from the Termite Protection Company – stating that part A and part B termite protection has been carried out in accordance with Australian Standard AS3660.1 if a chemical barrier has been installed. Note: sticker in the meter box is often incomplete and not sufficient.
· Compaction Certificate from a structural engineer.
· Use of Second Hand Materials – Some polices require any second hand materials used on the build to be listed and on occasions these will be excluded from the policy. Owner Builders may want to bring these to the attention of the inspector so that they can make any observation as to the condition of those materials, assuming they can still be seen.
Over the years, we have been requested to ensure that we have sighted the above documents by various Insurance companies when we conduct Owner Builder Indemnity Insurance building inspections. Where the documents are provided we will refer to them in our report. Where the documents are not provided our reports will simply note that the documents were not sighted. The key issue for clients is that it is not what Houspect requires, but what their nominated insurance provider requires as non-compliance of the insurance company documentation requirements may impact on the ability to secure the required insurances. We would suggest that you check with your proposed insurer as soon as possible to determine exactly what their unique requirements are.
Houspect can generally produce a defects report in support of an Owners Builders Insurance Application within 5 business days. This can be critical as often the requirement for the insurance covered is not recognised till just prior to the proposed settlement date.
If you need a defects report to support your Owners Builders Insurance Application just call Houspect WA Ph: 9240 8855 https://www.houspect.com.au/wa/